Assessing the construction of a flat steel factory in Colombia

The concerns that steel companies have long expressed about high imports of flat steel seem to be on the way to dissipating, given the conversations they have had with the Government, which advocates for a local industry that gains capacity and becomes stronger.
A week ago, five national steel companies and the Colombian Committee of Steel Producers of the Andi sent a letter – known by Portafolio – to the Minister of Industry, Commerce and Tourism, Luis Carlos Reyes, in which they agreed to participate in the proposal related to the sector embarking on the study of the installation of a flat steel manufacturing plant in Colombia and a blast furnace process to take advantage of strategic minerals existing in the country.

The letter says, “According to what was discussed, we would be starting the pre-feasibility study of the project once the National Government issues and publishes the decrees that adopt the trade defense measures that we have requested from the industry.”

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These measures, the private sector says, are related to safeguarding imports of steel bars originating in Peru, as well as safeguarding imports of low-carbon steel wire rods originating in countries with which Colombia does not have trade agreements in force.

Likewise, They argue that it is important to address the sector’s concerns within the framework of Article 259 of the Development Plan, which speaks of the establishment of smart tariffs and trade defense actions to support Colombian production.

The floor plan

The letter in which this sector accepts the Government’s plan to strengthen the activity is signed by Daniel Rey Suárez, executive director of the Colombian Committee of Steel Producers of the Andi; Fabio Galán, president of Acerías PazdelRío; Sebastián Castro, president of Ternium; Marcela Mejía, general manager of Siderúrgica de Occidente; Luis Alfredo Reyna, president of Grupo Siderúrgico Reyna, and Mauro de Castro, president of Diaco Colombia.

Businessmen express to Minister Reyes the desire of the national steel industry to structure and develop the technical pre-feasibility study new greenfield investment project for the start-up of the plant.

They warn that, due to its complexity, this requires at least 12 months to analyze various variables.

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These include an assessment of the availability of raw materials such as iron ore, metallurgical coal and energy in the country, and an analysis of the national and international demand for flat steel. Also, the selection of the best location for the production plant and everything related to the analysis and evaluation of logistics for the production and marketing of flat steel and the estimation of preliminary investment and operation costs.

Likewise, businessmen have presented to the Government their views on the importance of providing guarantees for current and future investments in the sector.

“It is important to note that the preservation of existing investments in the steel sector, as well as the promotion of new investments, requires the decisive participation of the National Government”they warn.
They add that this aspect is important to counteract unfair trade practices that seriously jeopardize a sector that generates 50,000 direct and indirect jobs in different regions and is at the head of the construction and infrastructure cluster, key to the economic recovery that the country requires.

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They also emphasize to Minister Luis Carlos Reyes that “Based on the experience of other countries that have decided to undertake new investment projects in this sector, clear signals are needed for potential investors regarding the commitment to combat this type of trade distortion, otherwise no current or future initiative will be viable.”

In one of the last sections of the letter, they assure that the set of measures agreed with the Government will allow to counteract the harmful effects of unfair trade practices, preserve the productive chain, as well as jobs, and “to have a sustainable steel industry that has the capacity to continue working with the National Government in the development of new investments.”

Resources in play

Together, the companies that signed the letter to the Minister represent the entire production of long steel in the country, and total five steel mills and 12 rolling mills, with an installed capacity of 2.6 million tons.

It is estimated that this productive infrastructure, In fixed capital it amounts to more than US$700 million.
While investments in the sector totaled $858 billion between 2020 and 2023, in the next five years they are estimated at $1.2 trillion, of which about 42% are part of the category of investments in environmental sustainability.

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In the technology and innovation sector, companies say they plan to allocate resources of around $375 billion between now and 2028, while in terms of competitiveness, the focus is on developments that could require around $334 billion in five years.

Constanza Gomez Guasca
Portfolio